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Re: 3xBuBu post# 4138

Tuesday, 05/17/2016 2:40:45 AM

Tuesday, May 17, 2016 2:40:45 AM

Post# of 4154


On Monday, Berkshire reported that it had bought 9.8 million shares of Apple stock at a cost of $1.1 billion. That’s about one-tenth of 1 percent of Apple’s stock and less than 1 percent of Berkshire’s investment holdings.

The news pushed up Apple’s stock price as much as 4.27 percent.

In the Yahoo deal, unconfirmed reports last week said Berkshire may supply cash to help Quicken Loans founder Dan Gilbert acquire Yahoo, which has been struggling financially but is valued by the stock market at about $36 billion. Berkshire, Quicken and Yahoo have not confirmed that report, although Buffett told CNBC on Monday that he might be willing to help finance a purchase by Quicken.

First, the Apple investment, made by Buffett lieutenants Todd Combs and Ted Weschler:

“Apple makes technology products, yes,” said David Rolfe, chief investment officer of Wedgewood Partners of Ladue, Missouri. “But with the iPhone franchise and their customer base, we actually view Apple as a consumer company. They have an unusually loyal following, real sticky.”

Berkshire and Apple are Wedgewood Partners’ two biggest holdings out of $8.5 billion it manages.

Apple’s customer loyalty gives it pricing power, and it has a long history of making profits and a strong brand name — three basic Buffett investment criteria.

The timing of the purchase made it somewhat of a bargain. Apple’s stock price topped $130 last summer, and a slump in revenue and iPhone sales dropped the price below $100 this year.

Rolfe said he recalls that several years ago Buffett said in an interview that he wished he had bought Apple stock early on. Apple was founded in 1978, and at some point it gained the status of an established, predictable business, even if it is within the technology sector.

That’s already true of IBM, a major Berkshire holding since 2011, Rolfe said. Buffett has said he bought IBM stock mainly because it is a business service company, although dealing mostly in computers.

The Apple purchase “isn’t groundbreaking,” said Cathy Seifert, an analyst with S&P Global Markets Intelligence, but is “a function perhaps of a shifting of the guard that will probably continue to uphold the tenets established by Buffett/Berkshire Hathaway.”

Combs and Weschler each manages about $9 billion of Berkshire’s investments, an amount that has grown steadily since they joined Berkshire in 2010 and 2011, respectively. Buffett manages the other $100 billion-plus.


http://www.omaha.com/money/buffett/warren-buffett-appears-to-be-embracing-technology-with-apple-investment/article_7c020296-1b72-11e6-906e-f72babc97f5c.html






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